Tesla stock price has suffered a big reversal and moved into a technical correction in the past few days. It has dropped in the last nine consecutive days, reaching a low of $438, its lowest level since December 3. So, will the TSLA stock price continue falling or bounce back this year?
Tesla faces a double whammy of slowing sales and high valuation
Tesla share price has retreated in the past few weeks as the company faces a double whammy of slowing sales and high valuation metrics. A report released last week showed that it delivered 418,227 vehicles in the fourth quarter, lower than the consensus estimate of 423k
The company’s deliveries were primarily because of its Model 3 and Y vehicles, with the other models having over 11,642 sales. Most notably, the company’s deliveries dropped by 16% from the same period in 2024.
Wall Street analysts believe that the company will deliver 1.75 million vehicles this year. It will then deliver 2.01 million in 2027, and 3 million in 2029. As in the past, there is a likelihood that the company’s deliveries will miss estimates.
At the same time, the company’s valuation has continued expanding in the past few months. Data shows that it is the second most valued company in the Nasdaq 100 Index after Warner Bros. Discovery. It has a forward price-to-earnings (P/E) ratio of 340. Its forward P/E ratio on a non-GAAP basis is 267.
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In contrast, other EV companies that are seeing stronger revenue growth have a much smaller P/E multiple. This includes companies like General Motors and Ford.
The company also has a forward PEG ratio of 8.24, also higher than the sector median of 1.78. Also, the forward EV/EBITDA ratio stands at 315, also higher than the sector median of 16.
There is no way of justifying this valuation difference between Tesla and other companies. Besides, this is a company that has faced several crises, including the falling sales of the CyberTruck and the Tesla Semi. Also, it is yet to deliver the Tesla Roadster it promised back in 2019.
Betting on AI and robotics
The main reason why the Tesla stock price has remained at an elevated level is because of its robotics and AI ventures. It is working on its robotaxis, a business it expects will be its biggest business over time.
However, the challenge is that the autonomous industry is still in its infancy, and analysts expect that Waymo will be a big competitor.
Tesla is also hoping to become a major player in the AI industry. Again, like its robotics business, analysts believe that its AI business is years or decades away from generating sales and profits. In a recent note, an analyst said:
“The market clearly looks at it as something more than a car company. However, it is at the end of the day, a car company. It would be interestingly easier for me to value if the company was a pure play AI company.”
Tesla stock price technical analysis
The daily chart shows that the TSLA stock price has pulled back from a high of $500 in December to the current $438. On the positive side, the stock is in the process of forming an inverse head-and-shoulders pattern, a common bullish reversal sign.
It has already completed the formation of the left shoulder and the head. Also, the stock has moved to the right shoulders. Therefore, the stock will likely rebound, potentially to the resistance at $500. In the long term, however, the stock will likely resume the downtrend as the valuation concerns remain.
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